Finance and Investment Promotion Deputy Minister David Mnangagwa has disclosed that banks are no longer offering long-term funding beyond 2025 when the multiple currencies regime is set to end.
Businesses in Zimbabwe are calling for legislation that guarantees the use of foreign currency, particularly the US dollar, beyond 2025. However, the government has not provided assurances, leading to uncertainty. The depreciation of the Zimbabwean dollar against major currencies has resulted in its rejection in the market. Current regulations allow foreign currency usage until 2025, restricting long-term planning for businesses.
Speaking during the Zimbabwe Association of Pension Funds Principal Officers and Chairpersons Convention, Mnangagwa said Finance Minister Mthuli Ncube was seized with the matter. NewsDay quotes him as saying:
"You may recall that, for this to come up, it was through a similar engagement like this one whereby the industry asked that we consider the use of the US$,” he said, in response to convention participants voicing their concerns over the expiry of the multi-currency regime.
It’s not only the pensions industry, the banking industry too has raised this saying they are not able to lend beyond 2025 and all papers they are handling are short-term. What I can assure you is that the (Finance) minister (Mthuli Ncube) is seized with this issue, so the industry does not need to panic about this."
According to data from the Reserve Bank of Zimbabwe (RBZ), loans in Zimbabwe increased significantly from ZWL$1.29 trillion in December 2022 to ZWL$10.19 trillion by the end of June. The rise was mainly due to an increase in foreign currency loans, which accounted for 94% of the sector’s loan portfolio. These loans were distributed across various sectors, with agriculture receiving 17.48%, distribution 14.19%, manufacturing 12.24%, mining 11.78%, and others.
AFC Commercial Bank’s Business Strategy head, Joseph Mverecha, emphasised the importance of macroeconomic stability for sustainable growth and industrialisation. He also advocated for extending the multi-currency regime until 2030 to create economic certainty and stability. Mverechena added:
"Government should also build foreign currency reserves, for example, accumulate gold and FX (forex). We need to strengthen confidence building to restore public faith and trust in macroeconomic policy."
Mverecha stressed the importance of authorities implementing policies consistently and providing credible macroeconomic forecasts. The government has faced criticism for policy inconsistencies, leading to a loss of confidence and reduced investment. Mverecha emphasized the need to establish a stable exchange rate to inspire confidence, highlighting the declining value of the Zimbabwe dollar. He also suggested reducing interest rates, lowering statutory reserves, and implementing a pooled facility for smaller banks to encourage borrowing and lending.